China Gas Utilities:Sector growth story sustainable,upgrading CR Gas to Buy

类别:行业研究 机构:德意志银行 研究员:Hanyu Zhang,Michael Tong 日期:2017-11-09

Upgrading CR Gas, also prefer BEHL and ENN

    Sustainable volume growth, manageable margin risks and improving free cashflows will support the gas sector’s growth story over 2017-19. Looking into2018, valuations are not demanding at an average 12x P/E. Specifically, wenow upgrade CR Gas, a high-quality laggard, to Buy, as we believe the marketunderestimates its coal-to-gas potential, is overly concerned about margin risksand ignores its best-among-peers balance sheet and FCFs. At currentvaluations, we also prefer BEHL (deeply discounted value play) and ENN (keycoal-to-gas beneficiary with cheap valuation).

    Sustainable volume growth story supported by coal-to-gas conversions

    We estimate an additional 69bcm/year volume upside from coal-to-gasconversions by 2020, contributing nearly half of China’s total incremental gasdemand. We now expect a 15% gas volume CAGR in 2017-20E in China,achieving 10% energy mix by 2020. Historically, the volume growth of leadinggas players is usually 5-10ppt higher than the national average and we expectthe trend to continue. Besides ENN (Hebei and coastal focus) and China Gas(North China focus), which have been recognized by the market as key coal-togasbeneficiaries, CR Gas also looks well-positioned with the largest exposure(14projects) to 2+26cities and more big city projects, where governments aremore active and able to afford subsidies.

    Margin risks manageable, winter gas shortage is a double-edged sword

    In this report, we dive deeper into gas sales margin trends by analyzing fourfactors that could affect margins. Overall, we expect margins to trend downgradually but at a tolerable rate (Rmb4-12cents/cm over three years). Potentialwinter non-residential city-gate price hikes (likely 15-20%) is another round ofstress test but we believe the risks are manageable. On the positive side,winter gas shortage has pushed up domestic LNG prices to a two-year high,helping eliminate the threat from LNG direct delivery, the price advantages ofwhich have diminished sharply in recent months.

    Rural opportunities: connection visibility vs. gas sales uncertainties

    We see increasing visibility of new connection growth in rural areas due tostronger pushes from local government; therefore, we believe China Gasshould be able to meet its aggressive connection target. Our typical ruralproject model suggests a 8%/11% project IRR/equity IRR but at the same timewe notice the IRR is very sensitive to many moving parts, including actual gasusage, dollar margin, capex and opex, all of which is debatable due to lack ofmature projects as benchmark. Variance of risk appetite might explain gasdistributors’ differing attitude towards rural opportunities. We respect ChinaGas’s pioneer spirit in rural areas and meanwhile agree with ENN and CR Gasabout their discretion and more disciplined return requirements.

    Valuations and risks

    We use DCF (WACC of 7.6-8.3%) and SOTP to derive target prices. Key risksinclude weaker demand growth, harsher margin squeeze, policy uncertainties.

数据推荐

投资评级

更多>>
股票名称最新评级目标价研报
广信股份 买入 -- 研报
金石资源 买入 -- 研报
桐昆股份 买入 -- 研报
万华化学 买入 -- 研报
利尔化学 持有 -- 研报
鲁西化工 买入 -- 研报
重庆钢铁 持有 -- 研报
马钢股份 买入 -- 研报
新钢股份 买入 -- 研报
方大特钢 买入 -- 研报
南钢股份 买入 -- 研报

盈利预测

评级选股>>
股票名称11年EPS12年EPS研报
万华化学 0.92 1.01 研报
广信股份 0 0 研报
鲁西化工 0.34 0.35 研报
桐昆股份 1.60 0.46 研报
金石资源 0 0 研报
利尔化学 0.49 0.46 研报
新兴铸管 0.75 0.67 研报
首钢股份 0.11 -0.02 研报
宝钢股份 0.51 0.60 研报
河钢股份 0.18 0.07 研报
新钢股份 0.26 -0.28 研报

股票关注度

更多>>
股票名称关注度平均评级最新评级
中信证券 34 持有 买入
伊利股份 33 持有 持有
隆基股份 32 买入 买入
华泰证券 32 持有 买入
贵州茅台 31 持有 买入
五粮液 31 持有 持有
万科A 30 买入 买入
格力电器 30 持有 中性
上汽集团 29 持有 买入
通威股份 28 买入 买入
三一重工 27 持有 持有
美的集团 27 持有 中性
泸州老窖 26 持有 持有
华能国际 25 持有 中性
中国国旅 25 持有 持有
中信证券 24 持有 买入
洋河股份 23 持有 买入

行业关注度

更多>>
行业名称关注度关注股票数买入评级数
电子信息 584 79 300
汽车制造 528 37 301
建筑建材 421 53 200
金融行业 418 28 191
电子器件 417 55 243
化工行业 379 63 117
钢铁行业 364 29 162
机械行业 333 42 111
生物制药 315 49 147
房地产 288 30 205
家电行业 278 11 132
酿酒行业 249 15 111
煤炭行业 235 23 98
服装鞋类 233 18 111
有色金属 231 49 71
酒店旅游 201 20 61
食品行业 194 23 68